Paycheck Protection Forgiveness – Updated Applications

loan forgiveness application for the Paycheck Protection Program

The Small Business Administration released a revised loan forgiveness application for the Paycheck Protection Program (PPP) on June 17th. Additionally, they also debuted a new EZ application for forgiveness of PPP loans that can be used by certain borrowers.

Forgiveness Clarification

  • Borrowers that received loans before June 5 can choose between using the original eight-week covered period or the new 24-week covered period.
  • Health insurance costs for S corporation owners cannot be included when calculating payroll costs; however, retirement costs for S corporation owners are eligible costs.
  • Safe harbors for excluding salary and hourly wage reductions and reductions in the number of employees (full-time equivalents) from loan forgiveness reductions can be applied as of the date the loan forgiveness application is submitted. Borrowers don’t have to wait until Dec. 31 to apply for forgiveness to use the safe harbors.

EZ Application

The EZ application requires fewer calculations and is intended to reduce complexity for borrowers that have not experienced reductions in wages or employees. Borrowers are eligible for the EZ application if:

  • They are self-employed and have no employees;
  • Did not reduce the salaries or wages of their employees by more than 25% and did not reduce the number or hours of their employees; or
  • Experienced reductions in business activity as a result of health directives related to COVID-19 and did not reduce the salaries or wages of their employees by more than 25%.

New Interim Final Rule Issued

Covered Period

The SBA published new rules on June 16th for the determination of payroll costs and the calculation of owner compensation forgiveness when using the 24 week period. The forgiveness period was extended by the Paycheck Protection Flexibility Act from 8 weeks to 24 weeks. The new rules reflect this change.

Owner’s Compensation

The PPP allows loan forgiveness for payroll costs including salary, wages, and tips for up to $100,000 annualized per employee, or $15,385 per individual over the eight-week period. The new interim final rule establishes the 24-week maximum for full loan forgiveness at $46,154 per individual. Owner compensation is separately limited to avoid concerns from the SBA that borrowers would receive a windfall benefit from PPP proceeds. Therefore, for the 24-week period, the forgiveness calculation is limited to 2.5 months’ worth (2.5 ÷ 12) of 2019 net profit, up to $20,833.

Other Provisions – Payroll Protection Flexibility Act

  • The application deadline for PPP loans remains June 30.
  • The proportion of PPP funding that must be used on payroll costs to qualify for full forgiveness drops to 60% from 75%.
  • The minimum term for PPP loans is raised to five years for all loans made on or after June 5. For loans made before June 5, the two-year minimum maturity remains in effect unless both the borrower and the lender agree to extend it to five years.

Source Documents

Revised PPP Loan Forgiveness Application and instructions

EZ PPP Loan Forgiveness Application and instructions

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